Signing of US-EC Trade Agreement Expands Opportunities for Wine

SAN FRANCISCO March 10, 2006 — California winemakers are applauding the signing of an historic trade agreement by officials of the European Community (EC) and the U.S. on key provisions of wine trade talks that began in 1983. The Wine Institute, whose members export 95 percent of U.S. wine, praised the work of U.S. Trade Representative Rob Portman who signed the bilateral agreement on winemaking practices and labeling of wine with EU Commissioner for Agriculture and Rural Development Mariann Fischer Boel in London today. James Murphy, Assistant U.S. Trade Representative, who led the negotiations on behalf of the U.S. government, also attended the ceremony today.

The agreement addresses wine trade issues that include mutual recognition of currently authorized U.S. and EC winemaking practices, recognition of each other's wine place names of origin, the U.S. limiting the use of certain semi-generic names in the U.S. market, and simplifying the certification process for both markets. It is the first phase of a broader agreement intended to promote trade between the U.S. and EC, which are major destinations for one another's exports.

"This agreement provides our California wineries with long-term access to European markets so we can make marketing investments with greater certainty," said Robert P. 'Bobby' Koch, President and CEO of the Wine Institute. "This is an important first step in leveling the playing field, and establishes an environment for continued communication. We are hopeful that the next round of World Trade Organization negotiations will reduce the huge EC subsidies to their wine sector."

"This agreement removes a major impediment to future growth of U.S. wines overseas," said Eric Wente, Chairman of Wente Vineyards, who is also Chairman of the Wine Institute and long-time head of its International Committee. "With more stable market conditions, California vintners can focus undivided attention on promoting the high quality, value and distinctiveness of their wines and on California's commitment to sustainable winegrowing."

Total U.S. wine exports to all markets reached $658 million in revenues in 2005. Nearly half of U.S. wine exports ($325 million) were shipped to countries in the European Community, the largest market for American wines.

For European wine producers, who exported $2.6 billion worth of wine to the U.S. market last year, the agreement ensures continued access to its top export destination and a major growth market - the U.S. is on course to become the world's largest wine consumer by 2008.

BACKGROUND

Among the key provisions of the new agreement of interest to California wine exporters is full recognition of U.S. winemaking practices which previously required renewed approval or "derogations" on a regular basis in order for U.S. producers to ship to Europe. The temporary nature of these derogations created continuous uncertainty for U.S. wine exporters. Winemaking practices around the world differ somewhat based on climate, history and culture. Most of the practices covered by this agreement are currently permitted in Europe for wines from countries such as Australia and South Africa that have trade agreements with the EC. The U.S. will continue to accept currently authorized EC winemaking practices as before.

Also of importance to U.S. producers is a provision in the agreement that calls for a new system to recognize U.S. wine place names of origin. While the U.S. has a stringent label approval process through the Department of the Treasury's Tax and Trade Bureau (TTB) that ensures recognition of foreign names for wines imported here, Europe has no central system to recognize U.S. place names. The agreement calls for the EC to recognize the names of states, American Viticultural Areas (AVA's) and counties with AVA's.

Finally, the agreement addresses a long-running discussion about the use of place names of concern to some European producers. Names, such as chablis, burgundy, port and champagne, called semi-generics, have been in use on wine labels in the U.S. since the 1800s. U.S. winemakers have been legally permitted to use a group of 16 specific semi-generic terms on labels if accompanied by an adjacent appellation of origin. The new agreement allows for the continued use of these terms on existing brands but not new brands, thereby addressing European concerns without diminishing the rights and investments that current U.S. brand owners have made in these terms over many decades.

Exports of U.S. wines have grown dramatically in the past 10 years, increasing more than 200 percent in value since 1997. The United Kingdom remains the top European market for U.S. wine exports and Italy, the Netherlands, Germany, Sweden, Denmark, Belgium and France, all EC nations, are top 10 markets for U.S. wine exports. Europeans are clearly embracing California wines as part of the attraction to the state's lifestyle and natural beauty and California's global reputation as a producer of high quality wine.

Wine Institute is the public policy advocacy and export marketing association of 900 California wineries and affiliated businesses. It was established in 1934.